Microsoft lost nearly $1 billion on unsold Surface tablets

Microsoft took a $900-million charge in its annual results because of the Surface tablet.

Microsoft took a $900-million charge in its annual results because of the Surface tablet. (Microsoft)

Salvador Rodriguez

Microsoft appears to be having a hard time selling its Surface RT tablets. The computer giant announced Thursday that it had to take a $900-million charge against earnings because of what it described as "inventory adjustment" for the device.

The large write-off may explain why Microsoft cut the price of its Surface RT models by $150 this month and gave away thousands of free Surface Pro tablets to attendees at its developers conference in June. Surface RT runs on a stripped-down version of Windows 8.

News of the Surface's struggles is a bad sign for the company, considering that the tablet was essentially the flagship Windows 8 device and required that Microsoft step out of its software comfort zone and into the world of hardware manufacturing.

Microsoft posted a nearly $21.9-billion profit for the year, but the company missed analysts' projections for revenue and earnings. Its shares, which closed Thursday at $35.40, down 30 cents, slid nearly 6% to $33.40 in after-hours trading.

Despite missing estimates, Microsoft said it was positioned for growth.

"Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most," the company said in a statement.

Microsoft will have to do a better job with the Surface, as the company said it would focus more on products like the tablet and other services going forward, rather than just relying on its Windows software.